SAN DIEGO, June 12, 2008 (PRIME NEWSWIRE) -- Ludlow China Ventures, Inc. upgrades its research opinion on Welwind Energy International Corp. (OTCBB:WWEI), a producer and operator of wind farms in China, with a 'speculative' B+ rating, and near term price target of $0.60 per share.
COVERAGE SUMMARY
Mark Blackwell, alternative energy research analyst with Ludlow Energy Ventures, commented, "The recent approval of applications made to the Military and the Guangdong Provincial Oceans and Fisheries Bureau should now open the door for the company to finalize a power purchase agreement (PPA) with the Chinese government. Once issued, this will now open the company to further PPA agreements as the Chinese government pushes for more 'green' energy solutions in the PRC.
"On a recent call to the company, Ludlow China has learned the new PPA could be valued at $90 million and has thus changed our valuation model. With a $90 million power purchase agreement, and just under 160 million shares outstanding, this would now give the company a valuation of $0.60 per share, or a market cap of $96 million.
"Thus, Ludlow China Ventures is maintaining its upgraded 'speculative' B+ rating and adjusting its near-term price target to $0.60-$0.70 per share."
VALUATION
With just around 160 million shares issued and outstanding, WWEI would have a market cap of only around $96 million at $0.60 per share. With the new PPA valued at $90 million, this would put WWEI into the range of $.60 to $0.70 per share. Compared to other wind and Chinese alternative energy companies this is still a relatively conservative valuation. Although dilution is a constant concern when dealing with small cap stocks, and the company will still need to develop capital for additional wind farms in China, they may be able to get around this situation through the issuance of bonds to financing further wind farm projects, and thus avoid any heavy dilution to the common shares outstanding. This will be an issue to keep on the radar going forward.
ZHANJIANG WIND FARM PROJECT
As announced in the June 27, 2006 company release, Potential Value of the Zhanjiang Wind Farm Project (based on 49 megawatt) are as follows:
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Yearly Cash Flows
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Year Pre-tax After-tax Cumulative
# $ $ $
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1 6,169,545 6,169,545 -13,133,613
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3 7,077,269 7,077,269 558,792
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5 8,053,922 8,053,922 16,169,340
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10 9,582,330 9,582,330 63,325,937
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15 4,220,843 4,220,843 87,019,525
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20 13,072,147 13,072,147 155,309,896
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25 16,606,800 16,606,800 234,391,049
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Summary -- The above yearly projection is based on the historical wind speed for the area of Zhanjiang. The figures reflect projected financials on a 49 megawatt install only.
The funds will be used to finance the phase one development activities of Zhanjiang Wind farm which is a five phase development totaling 600 Megawatts.
The company now has crossed the threshold to complete a 50 year Power Purchase Agreement and will have all the tools required to completely finance this first 49 Megawatts of development.
The Welwind Energy International Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3727
RISK FACTORS
Some risk factors that may effect the valuation calculations in this report are the companies inability to meet fiscal 2008/2009 revenue projections, an increase in shares issued and outstanding, decrease in interest or price/sales ratios of wind power stocks, industry competition, government regulations in China, technological advances, patent and copyright litigation, decrease in energy prices, geopolitical events, accounting changes and restatements, and legal issues.